“ Thailand’s support of small business
(SMEs) at the international level”
1st International Small Business Festival
Moscow, Russian Federation
December 13, 2007
by
Dr. Wimonkan Kosumas
Director
Department of International Cooperation and Policy Support
Office of Small and Medium Enterprises Promotion
(OSMEP), Thailand
Table of Contents
I. Background of the Office of SMEs Promotion
II. Overview of Thailand-Russia economic relation and trading
volume between the two countries
III. Comparative definition of SMEs (based on number
of employees) and profile of Thai SMEs
IV. Challenges of SMEs moving into oversea markets
V. Internationalization of Thai SMEs
VI. Government SMEs Supporting Policy
VII. OSMEP’s support for SMEs’ Overseas Business
Operation
VIII. Services and facilities for foreign SMEs
IX. Policy measures for upgrading competitiveness of Thai
SMEs and SMEs target sector 2007-2008
X. Implication on Business Potential
XI. Proposed Framework of Thai-Russian SMEs Cooperation
I. Background of the
Office of SMEs Promotion
established under the Small and Medium Enterprises
Promotion Act 2000 (publicized in the Royal Gazette on Feb.
17, 2000) as a juristic entity and a government office, not an
official agency or state enterprise.
supervised by the Board of Small and Medium Enterprises
Promotion chaired by the permanent secretary of industry.
Acts as the country’s central organization in formulating SMEs
promotional policies and strategies as well as coordinating
governmental and private working systems in achieving strong
and sustainable growth of SMEs as the main driving force of
the country’s economy.
In regard to translate the government’s SMEs promotion
policies and plans into concrete actions, the cabinet has
approved on May 6, 2003 the Master Plan of Thailand’s
SMEs Promotion (2002-2006).
Due to the expiration of the 1st Master Plan of SMEs Promotion
(2002-2006), OSMEP together with related public and private
agencies has formulate the 2nd Master Plan (2007-2011) which
Strategies of SMEs Promotion Plan 2 (2007-2011)
Vision: SMEs to Grow with Intellectual Infrastructure
Sustainability, Strength
and Balance
Strategy 1: Create new entrepreneur and Strategy 4: Promote the Capability on Value
develop the capability of existing
entrepreneurs Creation in Services Sector
Strategy 5: Promote SMEs in Network
Strategy 2: Upgrade Manufacturing Regional and Local Areas
Productivity SMEs & Alliance
Strategy 3: Increase the efficiency and
reduce impediment in trading sectors Strategy 6 : Create business environment
and enabling factors
Competitiveness
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International Governmental & Private Units
• MOU • Action Plan • Coordination
-Board of SMEs
Promotion
Regional -Executive Board
Central
of the Office of
• SMEs Data SMEs Promotion
Governor Ministry
• Action Plan • Sectoral
Local Strategies State
Ministerial Enterprise
• Registration Office
Other
Public
• Service
Provision
Academics
OSMEP • Policy /
Action Plan
Sector
Agencies
• Service
Local
Admin.
- Formulate Master & Action Plan Public Org.
Provider Agency - Create Mechanism in Academic/
Expertise
Creation implementing Institution
• SMEs Provincial
Industrial -Allocate Budget • Projects Chamber of
under SMEs Comm./Fed
University Federation
- Monitor and Evaluate Promotion Of Thai
Industries/
• Community/ Action Plan Bankers’
Local Provincial Assoc.
Product Chamber
of Comm.
OSMEP Regional offices
- Implement
- Implement
- Report Operational Result
Network to Promote - Report Operational Result
- Identify Problem/Demand
- Identify Problem/Demand SMEs 22
II. Overview of Thailand-Russia economic relation
Russia and Thailand enjoy a history of more than 50 years of trade
and economic relations
Thailand remains the largest trading partner of Russia in Southeast
Asia
First business contacts between Russian trade organizations and
Thai companies date back to the end of 40s following the
reinstallation of diplomatic relations between the two countries in
1941
In 2005, bilateral trade reached the volume of 2 billion USD after
significant slump in 1997 due to Asian financial crisis
According to the Thai custom statistics, trade surplus remains on
Russian side in 2006 with Russian export at 1.38 billion USD and
Thai import at 0.42 billion USD
Thai Exports to Russia Thai Imports from Russia
Product Value (million Product Value (million
USD) USD)
1. Automobile 93.9 1. Crude oil 477.6
and auto parts
2. Canned and 32.3 2. Rolled steel 437.4
processed fruits
3. Polymer 26.2 3. Scrap metal 113.1
4. Electric 25.6 4. Fertilizers 92.7
appliances and pesticides
5. Canned and 24.0 5. Pulp and 12.4
processed paper
seafood
Total value 234.8 Total value 1,195.4
Source: CIS & Balkan States Center, University of Thai Chamber of
Commerce ( period between Jan.-Sept. 2007)
III. Comparative Definition of SMEs
Thailand Russia
Act for the Promotion of Small and Federal Law on State Support of Small
Medium Enterprises B.E. 2543 (2000) Entrepreneurship 1995
businesses has either asset of no more self-employed individuals or (ii) legal entities
than 200 million baht or no more than 200 in which:
employees auhorized capital of public sector
Small Medium bodies, charities or businesses have
no more than a 25 per cent of their
Types of Employment Types of Employmen equity shares, where
business business t
the average number of employees
Production Not more Production 51-200 does not exceed the following limits
than 50
according to main sector of activity:
Service Not more Service 51-200 -100 in industry, construction and transport;
than 50
- 60 in agriculture, science and research;
Wholesale Not more Wholesale 26-50 - 50 wholesale trading;
than 25
- 30 retail trade and domestic services; and
Retail Not more Retail 16-30
than 15 - 50 in other sectors.
Profile of Thai SMEs
Number of SMEs, 2006
Number of SMEs by Size, 2006
2,287,057 enterprises in total
• LEs : 4,292
• MEs : 9,791
• SEs : 2,264,734
•Unidentified : 8,240
Total Number of SMEs
2,274,525 enterprises, 99.5 %
Number of SMEs by Sector , year
Number of SMEs by Sector, 2006 2006
Not
• Most of SMEs are operating in Trade& Specified
Service 0.8% Productio
Repair Sector for 908,846 enterprises Sector n Sector
(40.0 % of Total SMEs) 29.7% 29.6%
• Service Sector was the second largest
group for 675,622 (29.7%) Trade
and
• Production/Manufacturing Sector was Repair
the third for 672,351 (29.6%) Sector
40.0%
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Total Numbers of SMEs
2,274,525
Employment in SMEs, 2006
SME Employment by Size, 2006
In 2006, all enterprises in Thailand
created 11,551,272 jobs in total.
- LEs accounted for 2,687,938 jobs
- MEs accounted for 1,338,398 jobs
- SEs accounted for 7,524,936 jobs
- Totally, SMEs created 8,863,334
jobs or 76.7%.
SME Employment by Sector, 2006
Between 2004-2006, employment in
SMEs increased continuingly,
especially in Service Sector, which the
employment grew 10.8% in 2006.
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SMEs Economic Contribution
• In 2006, overall GDP
accounted for 7.81 million
baht of which 10.7% came
from Agriculture Sector
and 89.3% came from
Non-agriculture Sector.
• SMEs GDP accounted for
3.04 million baht or 38.9%
of overall GDP
• Between 2003-2006,
SMEs GDP share was in
steady line (approx. 39.0%
of national GDP), while
SME GDP growth rated at a
range of 4.1-4.8 % (y-o-y)
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SMEs Economic Contribution (Cont’d)
Structure of SME GDP in
2006
• Service Sector was the
highest with 32.2% share
• Manufacturing Sector was the
second highest with 30.3%
• Trade and maintenance Sector
was the third highest with
29.2%
Between 2002-2006
• SMEs in Service Sector had
been regarded as most
important economic engines in
creating GDP with 32.2-34.2%
share, followed by SMEs in
Trade and maintenance Sector
with 29.2-31.2%, and SMEs in
Manufacturing Sector came
third with 26.9-30.3% share
Role of SMEs in International Trade
In 2006, SME export accounted for
1.45 Mil.THB or 29.1% of total
export
In 2006, SME import accounted for
1.60 Mil.THB or 32.7% of total
import
Thus, SME Trade Balance still deficit
with amount of 0.15 Mil.THB
The ratio of SME Export to SME GDP
accounted for 47.3% indicated that
SMEs relied on domestic market
rather than international market
2004 /2547 2005 / 2548 2006 / 2549
SME EXPORT to TOTAL Export (% share) 30.2% 29.7% 29.1%
SME IMPORT to TOTAL IMPORT (% share) 32.9% 32.4% 32.7%
SME EXPORT to SME GDP (% share) 45.1% 46.7% 47.3%
TOTAL EXPORT to TOTAL GDP (% share) 59.6% 62.5% 63.3%
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Role of SMEs in International Trade (Cont’d)
• SME export classified by
level of factor intensities
shows that Primary
products was the highest
with 32.1% share, followed
by Labour Intensive
products came second with
19.2%, Third and Fourth
was High Skill and Medium
Skill products with 12.0%
• SME import classified by
level of factor intensities
shows that High Skill
products was the highest,
followed by Primary
products
15
SMEs Promotion Plan (Year 2007 – 2008)
Goals
1. To increase the contribution of SMEs to GDP to reach
5% of the national GDP per year.
2. To increase the number of new entrepreneurs by 50,000
per year
3. To increase SMEs Total Factor Productivity of 3% per
year
4. To increase SMEs export value to no less than 6% per
annum
5. To create product brand with a minimum of 100 per year
6. To commercialize SMEs innovation with a minimum of 100
per year
16
IV. Challenges of SMEs moving into
oversea markets
Human Resource Infrastructure and Business Commercial and
Environment administrative practice
Employing top Difficulty in procuring raw Uncertainties
quality managers materials surrounding regulation
& engineers enforcement by local
Insufficient infrastructure government
Difficulty in payment
Human
resource collections
management Inefficient legal system Foreign exchange
risk
High wages Draining technology/
know-how
Violation of
intellectual property
rights
STRENGTHS WEAKNESSES
High flexibility and adaptability Losing competitiveness in labor-intensive &
High utilization of local/ domestic resource-based sector
resources&knowledge Weak production structure; Poor management;
Well performed in skill-based sectors: Incapable in marketing; Lack of product
development; Employing low quality
food; fashion products; tourism and workforces; Using out of date technology’
related products&services Limitation in applying good governance:
Easy business access and quick consumer accounting system; consumer&environmental
approach responsibility
Eligible in producing products which are Limitation in access appropriate fund
various in design and quality Lack of integrating and networking system
OPPORTUNITIES THREATS
Trends of new business approaches favor SMEs Pressure from Globalization:
Easy for starting ups and allow workforce and - Economic integration between countries
new entrepreneurs to accumulate skills - FTA on Goods/Services/ Investment
Allow for business alliance with LEs and MNCs - New form of NTBs
Potential for the creation of new genre of SMEs promotion system is still fragmented
entrepreneurs
both in policy formulation and implementation
SMEs promotion is national agenda with high
High competition results in Nutcracker situation
level of significant
Obstacles from public administration
V. Internationalization of Thai SMEs
Problems
• Entrepreneurs fails to reap sufficient benefits from bilateral
and multilateral trade agreement with other economies
• National income generation policy still focus only on
increasing the number of exports and FDI inflows while
neglecting the importance of FDI Outflow
• In 2007, Institute for Management Development (IMD) has
ranked Thailand’s competitiveness at 33 which fall from 29 in
2006 due to low FDI Outflow
• Business restructuring from a manufacturing base country to
an investor country is necessary in order for Thailand to still
maintain its comparative advantage in the global market
Internationalization Project
initiated by Department of Export Promotion
Objectives:
1. To encourage oversea business expansion as
mechanism for value addition
2. To meet the challenge of liberalization and the
disintegration of preferential treatment such as
quota and GSP (Generalized System of
Preferences)
3. To maintain comparative advantage by relocating to
other countries which has lower cost of labor,
technology, and raw material
4. To increase the competitiveness of export in the
long run
Internationalization Project (con’t)
Offers 2 types of oversea business supports which
include:
A) Manufacturing dimension:
- sourcing
- subcontracting
- Green Field Investment
B) Non-Manufacturing dimension
- Sales Representatives
- Franchising
- Licensing
VI. Government SMEs Supporting
Policy
Government has proposed SMEs supporting policy to the
national legislative assembly on Nov. 3, 2006 as follows:
Development of intellectual infrastructure for SMEs
Collaboration between public and private sector
Development of Collaboration between
Intellectual public and private sector
Infrastructure
Create linkages between i.e. FTI and OSMEP
academic institutions and
industrial sectors Skills Enhancing
Personnel development in Industrial Standard
science and technology Upgrading
Increase multi-level research Establishment of SMEs
supporting channels with Incubation Center
emphasis on collaboration
between users and Competitiveness
researchers; motivate Improvement
innovation development of
Business Matching
the private sector
Machinery Fund
Delegate the public sector as
SMEs coordinating body in Logistics Networking
building economic Development of Provincial
infrastructure and Regional Industry by
Budget: 800 million baht
sectors
Provide financial tools which
support SMEs innovation Administration
VII. OSMEP’s Support for SMEs
Overseas Business Operation
A) International SMEs cooperation
B) Overseas Thai SMEs Agency cooperation
C) Internationalization Program
Samples of International
Cooperation on SMEs Promotion
Thai – Malaysia
Thai – France
Thai – Italy
Thai – Japan
Framework of Thai-Malaysia
Cooperation on SMEs Promotion
I. Information exchange of SMEs development
policies
II. Establishment of Malaysia-Thailand SME Business
Portal
III. Establishment of Joint investment and trade
mission
IV. Establishment of training program for
entrepreneurs in food processing and automotive
sectors
V. Organizing exhibition and business matching
Framework of Thai-Italy Cooperation
on SMEs Promotion
I. Establish SMEs help desk at OSMEP to assist
Italian SMEs doing business in Thailand
II. Information exchange of cluster development in
Italy
III. Promote the export of Thai organic products to Italy
IV. Collaborate on fashion design, jewelry (possibility
of establishing co-brand), and export of furniture
V. Organize workshop on alternative energy and
environment protection
VI. Sponsorship from Fierra Milano for ISBC 2007
Framework of Thai-France Cooperation
on SMEs Promotion
I. Development of Joint Cluster
II. Entrepreneurial registration
III. Advisory Support for Design
IV. Advisory Support for Branding
V. Experience sharing on Technical Institution for
SMEs
VI. SME Networking
VII. SME Working Group Meeting (at least once a year)
Framework of Thai-Japan Cooperation
on SMEs Promotion
I. Knowledge and experience sharing on the
establishment of SMEs University
II. Collaboration on the establishment of Business
Development Service Center
III. Development of business diagnosis or Shindan
IV. Exchange of SMEs expertise
V. Development of financial institution’s risk evaluation
of SMEs
B) Overseas Thai agency SMEs cooperation
Inform the National SMEs Promotional and Operational
Plan to be as a guideline for allocate budgeting for SMEs
promotion through strategic fund
Exchange of Business Data & Information Knowledge &
Know-how Linkage
Provision of in-depth information of trading partners
(economic, social and political) for facilitating the
investment decision of Thai SMEs entrepreneur
Coordination on MOU and Action Plan on SMEs Promotion
Support both in-bound and out-bound SME promotional
activities
C) Internationalization Program
subsidies to SMEs entrepreneurs
(not exceeding 50% of expense and
the maximum amount not
exceeding $7,000) for
international expansion through
international exhibition, business
matching, market survey or other
export promotion activities
VIII. Services and facilities for foreign SMEs
BUSINESS MATCHING
Increase trade opportunity, match world’s demand with Thai’s supply
FTI members Target market
SMEs Market Intelligence
Channel
•Product scope • Demand
Matching Activities •Standard / Specification
•Community Products
•Quality Assuring • SMEs Shop Channel •Taste
By “Q-mark” •Trade regulation
• SMEs Trade Promotion
•Etc.
•Thai confectionary
• Business Trip
• Exhibition
• Product catalog
• E-commerce
Objectives
Market Exploration % Sales Growth / Develop to be
Minimize Defects regular customers 33
Product Cluster in Thailand
1. Upper Northern Provinces 6. Upper Northeastern
griculture, handicraft Provinces
agriculture, fashion, textile, Tourism, border trade,
tourism, ICT. blue-dyed cotton,
ecological tourism, jasmine
2. Lower Northern Provinces rice, logistics, bio plastic.
Rice, sugarcane, sugar, Specific SMEs Categorized
livestock (pigs), agricultural; based on the Area 7. Lower
process, logistics and services. Northeastern
(Cluster Development)
Provinces
3. Upper Central Provinces Textile, silk, pork
Flowers, garden trees, molds, process, tourism,
poultry, partridges, automobile automobile, rice.
and assemblies, rice, beef cattle,
construction and decoration
8. Eastern Provinces
materials, furniture and aquatic
Tourism, processed seafood,
animal process.
jewelry and ornaments, fresh
4. Lower Central Provinces and processed fruits,
Quality pigs, organic rice, automobile and assemblies,
bio plastic.
processed shrimps, tourism,
canned pineapples. 9. Border Southern Provinces
Goat, rubber, Abalone
5. Southern Provinces mushroom, herbal vegetables,
tourism,hotel,rubber fruits. 34
Venture Capital Fund
(VCF)
- Provide equity financing
to targeted SMEs
- In charge of shareholders
- Support for enhancing
SMEs strengthen
Venture Capital Fund in
Thailand
A) Venture Capital Fund for
Enhancing Competitiveness of
Thai Business
B) SMEs Venture Capital Fund
C) Innovation Development
Venture Capital Fund
Media to access recent SMEs
movement
SMEs Today magazine
SMEs Shop Channel (UBC Channel)
SMEs Chee Chong Rouy TV Program
(Channel 11)
IX. Policy measures for upgrading
competitiveness of Thai SMEs
A) Promotion of SMEs network through the
development of cluster
B) Employment of standards (especially on agricultural
products)
C) Capacity building through training, mentoring,
provision of consultancy service, e-projects and
SME university
D) Creation of business opportunity through domestic
and international business matching activities
SMEs Target Sector 2007-2008
1. Manufacturing 2. Trading 3. Service
1.1 Indigenous 2.1 Retail
- Light industry : textile, 2.2 Wholesale
Leather, gems/jewelry,
Printing matter, packaging 2.3 Trading firm 3.1 Tourism industry: hotel,
restaurant, souvenir shop
- Engineering and electronics: tourism, spa, conference
metallurgy, machinery, mould, holding related-business (MICE)
electrical appliances, automotive parts 3.2 Other services : information
4. Regional and local Technology, software
- Natural resources: food, (digital content),
medicine, herbs, wooden furniture, business consulting, health
rubber products, ceramics, gifts,
and beauty, construction design,
souvenirs, household 4.1 Manufacturing,
decoratives logistics, education,
1.2 New wave Trading and service entertainment
- Animation, multimedia, 4.2 Community
computer games
- Alternative Energy and products
energy saving
Link 10 51
X. Implications on Business Potential
Geographic complementarities
- Russia: as gateway to the Commonwealth
Independent States
-Thailand: as a gateway to Southeast Asia and
southern China
■ Russia’s abundant source of raw material
- Thailand can import from Russia or penetrate the
Russian market by direct investment in Russia (in
forestry, jewelry, furniture and paper industry) and export
to third countries
■ Rapid infrastructure development and expansion of
service sector in Russia:
- vast potential for Thai business which include spa
and beauty , interior design, restaurant, and hotel
XI. Proposed Framework of
Thai-Russian SMEs
Cooperation
Expansion of business matching to increase joint investment
Joint cooperation between private sectors, particularly
chambers of commerce, in the following sectors:
● energy sector
● metal industry
● natural rubber manufacture
● jewelry industry
● tourism
■ Exchange of SMEs development policy through seminar/s
conferences, study-visit, and training
■ Establishment of Russian-Thai Business Council (under
ongoing process)
■ Establishment of SMEs exhibition or pavilion to expand
business partnership
THANK YOU FOR YOUR KIND
ATTENTION
SAWASDEE KA!
www.sme.go.th
Appendices: Other OSMEP’s project for SMEs
development
SMEs University
SME University is consisting of:
1. E-SMEs University
2. Practical Curriculums through the University
and College in Thailand
7
OSMEP E-SMEs University Assumption U.
Various Subject- E SME University
1. Entrepreneurships concept for
strat-up SMEs
2. Introduction for Marketing
3. Introduction for SMEs
Financial
4. SMEs Management for
sustainable
5. Business Creativity &
Innovation for SMEs
6. ICT & E-commerce for SMEs
7. Production Management &
Service Businesses for SMEs
8. Business Strategy & Trend /
Opportunity for SMEs
9. Advance Marketing for SMEs
10. Accounting and Financial
Management for SMEs
11. Corporate Governance
12. Business Plan
8
SME UNIVERSITY
SMEs University Curriculum Model
Major 70: Practice 30
Financial
Management
General
Management
Sale & Marketing
Management
Manufacturing
Management
Innovation
Management
New Technology
Venture
- Considering a start up - According to local - Time & Situation
company smart businesses
- Real case study - Practical & OJT - Law & Regulation
9
C) OSMEP E-Projects / SME@Click
Business Business Business Business
Startup Improvement Expansion Maturity
Virtual E Mentor Digital E Biz Net E Market E
Coach Universit Place Innovation
y
Business E- Mentoring E-Self E-Marketing Online R&D
Setup & Consulting Learning Tools Information Catalog Information
Coaching & Service Service and
Franchise SME-
Simulation Researcher
Matching
11
OSMEP e-Projects / SME@Click
SME@Click Main Virtual Coach Digital University
Page
Virtual Coach E BizNet E InnoMarket 12
Warning System for Investment and SMEs Corners
1. Type of SMEs
7. ROI per Sector
2. Characteristics 8. Economic Value
of Sector Added per
3. Assets per Sector
Sector 9. Financial Ratio
4. Liabilities per per Sector
10. Export and
Sector Import per
5. Revenues per Sector
Sector 11. Employment
6. Total Sales Rates per Sector
per Sector 12. No. of SMEs
per Sector
13
Warning System for Investment and SMEs Corners
SMEs Supply and Value Chain SMEs Export and Import Positioning
SMEs Financial Situation Positioning SMEs Financial Health Positioning 14
Warning System for Investment and SMEs Corners
Payab University
Siam University
Rangsit University
Christian University
and 4 more each year 15
SMEs Tool Kit
Business Manual for start-up SMEs
Marketing/ Sales/ Accounting/ HR/ Production/ Services/ ICT/
Sufficiency Economy including Good Governance
Practical Guideline for SMEs and able to apply for own business
which makes SMEs confident to run business.
Interactive E-Book & Lesson Learn from selected SMEs entrepreneurs
16